So we are going to try and Santa rally today again? Fauci can just keep his mouth shut this time

Thursday Macros

We said the first two weeks of December were going to be volatile... We have not been disappointed...S+P reversed 3.2% from its high to its closing low, Russell 2000 was even more volatile moving 4.8% from high to low... Treasuries rallied with new low yields in the 30 year space... The 10 year moved from 1.50 yesterday to 1.40 ish and reversed... But as we start to write this, we see that the risk on from the overnight session is evaporating quickly... Another volatile day expected? You can count on it... Even though Kolvanic and his team said overnight to buy equities... He will be right, but not today.

Treasuries... Classic flattener... We said that when 5/30s went through 74, the next level was 56, we are at 57+ right now... If that breaks then the next level could be as narrow as 22, that would start talk about inversion, which would lead to the discussion of recession... There is no way the US economy is going into recession, the Atlantic Fed GDP number reached close to 10% yesterday.. But that won't stop the talk about rate inversion... Meanwhile 10 years is holding the 1.42 level... The next level is 1.36... For 5 years , the range is still intact of 1.04-1.34... We doubt the front end breaks through given the tapering acceleration talk and rate rises... But there is a caveat that few are talking about... HOW ABOUT A BALANCE SHEET REDUCTION... Once tapering is done , and if rates continue to remain low in the long end, should the Fed consider a Balance Sheet reduction?... Otherwise, sell the long end of their treasury holdings...the Fed should be opportunistic... Take what the market is giving them... Just a thought...

Equities... Market participants seem overweight risk and underweight treasuries... Bob Michele of JPM Asset management was out yesterday saying to sell treasuries and buy credit... He is right as treasuries are going to have their second negative year in a row...even with the rally yesterday the lgtrtruu index is showing a YTD of negative -5.78%... So the pain trade is there and volatility will continue...

Savior... Corporate credit came back yesterday with abandon....a dozen borrowers flooded the credit market yesterday with 15 billion of new issues. Issuers did pay more than 6 basis in new concessions on order books about 4 times oversubscribed... These are very good dynamics and shows the demand for credit is still solid. US junk clawed back recent losses propelled by the CCC's with the index gaining the most in 4 weeks, yields dropped 10 basis to 7.41%..

Fed... 4 speakers today, with Bostic speaking twice... We saw Bostic's name on the short list for Fed Vice Chair for Supervision... Even though it is very clear that Warren is pushing hard for Cordroy... Bostic would be much better for Banks as he has no hidden agenda... But the Fed seems to be getting behind the new Hawkishness of Powell... Powell was clear in his testimony that the Fed now fears inflation more than Covid... See our Balance Sheet idea above...

Outlook for the rest of the week... As we started this writing the S+P moved down 20 points, now they are coming back... Volatility and lack of liquidity are exacerbating the moves... One case of Omicron in California and doubling of cases in South Africa are clouding the headlines... Meanwhile no one seems to be focusing on the data from Israel, or even the second part of SA, where hospital stays are short and young people are exiting the SA hospitals rather quickly...as for markets, they are over their skis in risk... And the volatility is causing whiplash in many sectors...Nonetheless, for most of the last 2 years the low yield in rates happens the morning of the unemployment number... Guess that will be tomorrow at 8.28 am... Have a choppy day... Look for opportunities... The US economy is solid and the Fed Hawkishness will not deter the global economy... A correction is close in a few sectors, but many think it should be bought...

And one other thing, Yellen speaks today... Given the lack of focus on the debt ceiling, we hope the government does not shut down this weekend... That would just add to the FTQ fears

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Here is my thesis for today if you want to toss it on the board.

Think the QQQ will see the 50DMA today. I'll nibble at some QQQ at the$380.50 area for a bounce, but my stop will be tight. Don't get long any technology until we see how the QQQ handles the 50DMA. Last time the QQQ closed under the 50, we stayed under it for almost 3wks.

I'll likely be waiting until 9:30 before I consider putting on anything. Want to see order and option flow for a bit before I decide which way I want to play.

367 would be a 10% pullback. 347 would be a 15% pullback. Not saying we'll see that, but those are levels I'm eyeing for correction.

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This is from our banished brother.

BaylorSpineGuy said:

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Can someone explain this banished stuff? Not sure what's going on there. F16 or some such?

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When feisty people go to the politics forum (forum #16, or "F16") and get feisty, they tend to get banned for awhile, if not forever. Prog and Irish are kind of habitual about this sort of thing.

McInnis 03 said:

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BaylorSpineGuy said:

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Can someone explain this banished stuff? Not sure what's going on there. F16 or some such?

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When feisty people go to the politics forum (forum #16, or "F16") and get feisty, they tend to get banned for awhile, if not forever. Prog and Irish are kind of habitual about this sort of thing.

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And when that happens, the market tends to puke. It's all connected.

McInnis 03 said:

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BaylorSpineGuy said:

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Can someone explain this banished stuff? Not sure what's going on there. F16 or some such?

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When feisty people go to the politics forum (forum #16, or "F16") and get feisty, they tend to get banned for awhile, if not forever. Prog and Irish are kind of habitual about this sort of thing.

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....and the June/July survey of Big Banks told us they expected the S&P 500 to end the year at 3800 to 4400.

Those of you with ca$h and cojones should be buying beat up high beta growth and tech today if these reversal candles hold. Just be responsible and set your stop loss at yesterday's or today's low.

Pick any one of them. They are a dime a dozen... old favs $SQ, $PLTR, $FUBO, $ROKU, etc. Just be smart cause they could still rip downwards.

PS... the fintwit circle jerk echo chamber is unbearable during waves like this. It is quite nice that this forum has matured past that mentality. Kudos to you all!

matured or beaten into submission